Rail Executives Pledge More Investment in Freight Corridors as Economy Improves

This story appears in the Sept. 13 print edition of Transport Topics.

NEW YORK — Railroads large and small gave investors two consistent messages — economic growth will be slow but steady, and they will continue their commitment to investing in new projects such as freight corridors.

Five industry executives made these key points when they spoke Sept. 8 at the Dahlman Rose investor conference here.

“There is a slow but nonetheless continuing recovery,” said Charles Moorman, chief executive officer of Norfolk Southern Corp., Norfolk, Va. “If you look at the balance of the year, it is a pretty good story.

“Our markets continue to see relatively strong carloadings,” Moorman said, noting that third-quarter traffic is expected to exceed that of the second quarter.

Other rail executives echoed Moorman’s theme.

“We are seeing a slow, steady recovery,” said Robert Noorigian, vice president of investor relations for Canadian National Railway. He said the Montreal-based railroad has seen shipment volume increase to pre-recession levels.

“It is a lot more fun than late 2008,” Noorigian said.

“The only certainty in the economy is that it is going to be volatile for the next few years,” said Kathryn McQuade, chief financial officer for Canadian Pacific Railway, Calgary, Alberta.

She also said the company was pleased with the amount of economic recovery that has occurred.

She attributed a 14% growth in traffic so far this year from 2009 to a stronger global trade environment that has boosted demand for inbound container shipments, as well as for Canadian commodity exports.

Gary Long, CEO of Omnitrax, a short-line railroad operator based in Denver, said economic growth is going to be “slow and steady” for the next two or three years.

Rick Webb, CEO of Watco Companies, Pittsburg, Kan., another small railroad operator, used the same words to describe his expectations for overall economic growth, though he added that his company is insulated from consumer markets because of its concentration on bulk shipments such as grain and crude oil.

Domestic intermodal carriage has been a strong point for Norfolk Southern, which Moorman said the company is seeking to exploit by expanding rail capacity on routes between the Southeast and Northeast and between Virginia ports and the Midwest.

He described the Eastern United States as a “target-rich” area where intermodal transport eventually could divert 1 million truck shipments a year to rail.

Moorman said the Southeast-Northeast route is “the last major freight flow that has not been significantly addressed by rail intermodal.”

Norfolk Southern’s route between the regions largely parallels Interstate 81, a key truck route that Moorman singled out in his comments.

“If any of you have the dubious pleasure of driving I-81, you drive in terror because of the number of trucks,” he said.

The issue, he said, is that the road is carrying two or three times more trucks than it was designed to accommodate.

The railroad has won $105 million so far in federal support for its initiative, which is channeled through five states in the region.

Another grant for $110 million of federal funding for rail projects is pending for the railroad, whose latest balance was $855 million in cash at the end of the second quarter.

“From a public policy standpoint, a lot of people see this as the poster child for the way we should be doing transportation policy,” Moorman added. “We see it as a wonderful opportunity.”

Other carriers’ executives are focused on different, more modest initiatives.

McQuade said that Canadian Pacific is seeking to boost efficiency in freight yards to further speed train service.

Noorigian said one of Canadian National’s initiatives is to establish more services such as warehousing.

On the smaller railroads, Webb highlighted efforts to expand businesses in bulk markets, as well as add business by doing more railcar repairs for other companies.